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Why Government Fails, But Individuals Succeed

The title of my new book is No They Can’t! Why Government Fails, But Individuals Succeed. It’s a response to the last presidential election and that “Yes we can!” hysteria. The idea that politicians “fix” our lives is a fatal conceit. Candidate Obama even said that electing him “will bring us to the moment when the rise of the oceans began to slow and our planet began to heal!” Was it Moses talking? Polls suggest Americans are dissatisfied with government; Rasmussen recently found only 8% of Americans say Congress is doing a good job. But in a crisis, we instinctively turn to government. We say, “There ought to be a law!”

One example: after 9/11, we were scared. I was more scared than you, because I live in New York City. I didn’t flinch when Congress said, “We need to take over airline security.”

Now, the old airport screeners had correctly followed the government’s rules before the terrorists hijacked the planes. The FAA allowed those small knives they used. But Senator Tom Daschle said, “You can’t professionalize if you don’t federalize.” Then the Senate voted 100 to 0 to create the TSA. How’s that working out for us?

TSA: Thousands Standing Around

It’s possible that the TSA has prevented terrorism. We don’t really know, because so much is secret. But I do know that it was no government official, but passengers, who stopped the shoe bomber and underwear bomber. And we now know that the current TSA spends ten times what the previous screening system spent.

There’s one big airport where the TSA is not in charge: San Francisco. The law allows an airport to opt out of TSA screening and return to competing private screeners. We interviewed passengers in San Francisco and they said things like, “Gee, these screeners are friendly. What’s that about?” And “the lines here moved more quickly.” But do the private screeners keep us safe? The TSA did its own undercover testing, comparing screeners in San Francisco and Los Angeles. The result? San Francisco screeners found contraband 75% of the time compared to 25% for the Los Angeles screeners.

So why would they be friendlier, faster, and better at finding contraband? Because they work for a private company and the private company knows that if it does well, it may be hired by other airports and make more money. If it doesn’t do well, it may get fired. Nobody ever fires the government.

That’s why Israel and most of Europe use private screeners—government supervision but private, competing screeners.

Why are San Francisco’s private screeners better? Because the company innovates. They have contests where a screener can win $2,000 if he’s fastest at unpacking and repacking luggage, or better at finding phony pipe bombs. He’s rewarded if he’s more courteous to people. The screeners are proud of their success. They don’t act like government employees.

Bureaucrats Want Power

So other airports get wind of this and say, “Hey, we want to opt out, too.” The airport near Glacier National Park, Montana, is busy in summer and dead in winter. Of course it’s dead in winter—people don’t want to go to Montana then. But the TSA, being government, maintains the same level of screening all year long.

So in summer, there are long lines. In winter, TSA stands for its initials: Thousands Standing Around. So the Montana airport manager wants to opt out. It’s written into the law that airports may opt out. But they have to ask the TSA for permission! In fact, more than a dozen airports told the TSA, “We want to opt out.” What did the government do? They ignored the request for a year. Then, a couple of months ago, they sent all the airports a letter that says: you may not opt out, we do not consider this advantageous to the federal government. Wouldn’t McDonald’s like to say that to Burger King?

Why do they say “no”? Because the bureaucracy wants to preserve its power. Bureaucrats know they’ll have less power if other airports opt out, so they hold on tight. This is what government does.

Yet central planning appeals to people. There’s this sense that the wise elites in Washington and state capitals ought to plan our lives. After all, they’re specialists, and many are very smart. I have trouble getting my brain around how you build a sewage treatment plant myself. Our instinct is to say, “Yeah, let the planners plan.”

The Invisible Hand Works

But the truth is: it never works well. We’re programmed to like central planning because when we’re little kids, mommy and daddy planned our life and kept us safe. Our ancestors, for thousands of years, lived in groups of a hundred or so people. Then, you followed the tribal leader, or you were in trouble. If you didn’t harvest the fruit when the clan leader said you should, you might have starved and not given birth to people who gave birth to all of us today.

So we’re programmed to follow the experts. It’s harder to imagine the alternative: the invisible hand. It’s invisible, after all. Friedrich Hayek called it “spontaneous order.” People following their own self-interest work things out on their own. In a country of 300 million people, or a world of seven billion people, the invisible hand is the only thing that works. But that’s not intuitive.

I structure No They Can’t around this dichotomy between intuition—and what my reporting has taught me. Central planners say, “Okay, Stossel, capitalism works for some things—simple things like computers, cell phones, movies, music—but when it comes to the important things, whether we live or die, or complicated things, like education, you’ve got to have government control because the customer doesn’t know enough. Are you telling me you’re going to have a free market in medicine? When you’re having a heart attack and on the way to the hospital, you’re going to do research on which is the best hospital to treat your heart attack or what the prices are? What a joke! And when it comes to education, a parent doesn’t know what the curricula should be or who a good teacher is. How is she going to judge?”

That’s intuitive. Defenders of the free market often back off when they hear that. But the truth is that the free market is better at everything, including complicated things.

Pride of the Soviet Bloc

Take cars. Do you understand why one is better than another or runs better than another? I sure don’t. But compare the worst car you can buy in Colorado with the best the planned economies could produce.

Remember the Trabant? You younger people may not know about it, but it was the pride of the Soviet bloc. And this was built by actual rocket scientists—the East Germans! Yet it was an awful car. It was hard to drive, it polluted, and they even had to put the oil and gas in separately and shake the car to mix them together.

Yet the Trabant was the central planners’ best product, and in the Soviet Union people waited two to five years to get one. Then the Berlin Wall went down, and the Trabant disappeared. It couldn’t compete with our mediocre cars.

Why? Because not everybody has to be an expert for the free market to work its magic. You just need a few car buffs, a few people who read the car magazines. The good and bad news spreads. In an open society, the good companies thrive and the bad ones atrophy. That would work for education and health care, too. But government keeps growing because politicians say, “Look at the good things we do.” And we believe.

Claiming to Lead the Parade

How about OSHA? Some of you know about it. It’s the Occupational Safety and Health Administration. It made sense. Some greedy businessmen ran factories that were dangerous and workers got hurt and killed. So we need the experts in Washington make a rulebook. The rulebook is now thick; even the lawyers don’t know what’s in it, but the government officials can point to a gradual decrease in workplace injuries and deaths in America and say, “Look how many lives we’ve saved since OSHA was created.” The “small picture” chart below is impressive, unless you go back to the time before OSHA and see that in the big picture, OSHA didn’t make any difference. Deaths were already dropping!

Why does this happen? Because in free societies, things get better! We get smarter. We learn from the last accident and take steps to reduce the chance that it will happen again. As we get richer, we care more about safety. Finally, even the greediest factory owner cares if only because it costs him money to train workers to replace the ones that he kills.

Politicians claim it’s they who make us safe, but government is like someone who jumps in front of a parade and claims it leads the parade.

War on Poverty: Who Won?

Another example is the war on poverty. Lyndon Johnson promised to fix poverty with welfare. The poverty rate did drop sharply the first five years after welfare was created. But then, as you know, the progress stopped. I would argue that the poverty rate stopped dropping because welfare taught people to be dependent.

Welfare advocates could still say, “Well, at least in the first five years we got lots of people out of poverty.” But in fact, the poverty rate dropped even more sharply before welfare began. Americans were lifting themselves out of poverty on their own! Government stepped in and stopped the progress.

This happens again and again and yet, government grows. It keeps growing. On the next page is a graph of the growth of government since the beginning of the republic. The spikes are World War I and World War II. Notice that for most of the history of America—and when we grew fastest—government was less than three percent of the economy. Today, it’s about 40 percent (including state and local spending) and as you know, we are on an unsustainable course.

I’m partly at fault—I and my fellow baby boomers—because, rudely, we refuse to die. And we want what modern medicine brings us. When FDR created Social Security, most people didn’t even reach the age of 65. Now the American life span is about 78.

There’s just no way we can tax young people enough to pay for what the politicians have promised us. And yet they keep spending more. Thomas Jefferson said it is “the natural progress of things for government to grow and liberty to yield.” And that’s what’s been happening.

Someone Organize Those Skaters

How do we convince people that central planning fails and that more of it will bankrupt us? The alternative, the spontaneous order, is not intuitive. Think about a skating rink. What if you had never heard of a skating rink and I told you, “I’m going to make money offering people recreation. I’m going to have a field of ice. People will strap sharp blades to their feet and zip around at high speeds. Young and old, skilled and unskilled. My only rule is that everyone must skate counter-clockwise.”

You would say “No! We need rules, skating cops, stop lights, someone saying ‘turn left, turn right.'” It’s not intuitive that a skating rink could work. But it does. The spontaneous order works much better than government’s central planning.

But we don’t notice that. We take free markets for granted. We take it for granted that we can go to a foreign country and stick a piece of plastic in the wall, and cash will come out. And we can give that same piece of plastic to a total stranger, someone who doesn’t even speak our language, and he’ll rent you a car for a week.

When you get home to Colorado, Visa® or MasterCard® will have the accounting correct to the penny. If they don’t, you’ll get upset and complain. But government can’t even count votes accurately!

And now the advocates of big government tell us that government must run health care? Give me a break! Government fails, but individuals succeed.